Fueling growth momentum

Dec 07,2017

Korea’s November exports hit a record $49.67 billion. The exports showed a whopping 9.6 percent increase year on year and have been on the upswing for 13 consecutive months. The surge has been led by our 13 mainstay products, including semiconductors, general machinery, petrochemical products and computers, which showed a double-digit increase from 2016. The total sum of exports soared to $524.8 billion — a remarkable 16.5 percent growth compared to the same period last year.

If such a positive trend continues, it will almost certainly recover our total trade volume of $1 trillion. Under such robust circumstances, the Bank of Korea has ratcheted up our economy’s potential growth rate for the third quarter to 1.5 percent. The highest in six years and six months, the rate also reflects a 0.1 percentage point increase from the initial figure the central bank estimated last month.

The dramatic turnaround is surely good news, particularly considering all the gloomy headlines that dominated our industries across the board a year ago. Up until 2016, economic analysts mostly came up with depressing forecasts that our growth rate would hover barely over 2 percent this year, as the economy would not recover its vibrant exports.

Nevertheless, it is too early for us to get excited because the rebound largely originates with favorable external conditions rather than from our internal strength. For instance, the recovery owes more to the global boom in semiconductors, China’s better-than-expected economic performance and low oil prices, to name a few.

We cannot but worry about the possibility that our recovery stemmed from a temporary turnaround of economic cycles instead of enhanced competitiveness of our industries overall. As we have seen in October — which included the longest-ever 11-day Chuseok holiday — real economic indicators for consumption and investment, as well as psychological indices like composite leading indicators, all fell.

To sustain the pace of our recovery, the top priority should be put on innovative growth and restructuring, as we repeatedly underscored. The government must create an environment for entrepreneurs to raise funds and for each household to spend more on consumption. That calls for a meticulous balance between growth and distribution by the government. The Moon Jae-in administration must address the growing public concern that it only concentrates on distribution and not growth. The government must take the recovery as an opportunity to upgrade our economy.